news Communications Minister Malcolm Turnbull has issued a statement to the effect that the NBN company’s alleged “overbuilding” activities were based on regulatory decisions to ensure “fairer” competition in the broadband market that would allow the NBN company to compete with commercial providers.
Yesterday it was revealed that the NBN company appeared to be deploying its own competitive infrastructure to a housing estate in Sydney, Sydney Park Village, which then-Shadow Communications Minister Turnbull had specifically used during the 2013 Federal Election campaign to highlight the strengths of his chosen Fibre to the Node technology.
Subsequently, the telco constructing the infrastructure, OPENetworks, has accused the NBN company of duplicating existing high-speed, open access broadband infrastructure around Australia in comments published by ZDNet. Delimiter has also been contacted directly by a number of readers who have supplied further information highlighting alleged overbuild activities by the NBN company.
In some cases, the company’s approach is particularly difficult to understand, because the NBN company is duplicating existing high-speed broadband infrastructure that already provides wholesale access to competitive telecommunications companies. Before the election, Minister Turnbull said in such circumstances, the NBN company would likely seek to acquire the existing infrastructure instead.
It is not clear why the NBN company is seeking to duplicate the infrastructure, rather than acquiring it. Questions also exist as to why the company is not instead prioritising other areas which do not already have access to high-speed broadband infrastructure.
The NBN company has not responded to a request for comment on the issue filed 24 hours ago.
This morning, Minister Turnbull’s office issued a statement in response to the allegations, which has been compiled by his Department of Communications.
“Following the consideration of the 2014 Vertigan regulatory review, the Government announced it would place fixed line competition on a fairer basis while ensuring consumers have access as soon as possible to faster broadband,” the statement said.
“This means there is scope for alternative providers to install competing infrastructure, but equally it means there is scope for NBN Co, as a commercial entity, to compete, as long as it makes commercial sense. That’s what NBN Co has been doing here.”
The Department said there was also an added dimension to the situation which represented “a unique policy challenge”.
“Many alternative providers are deploying superfast broadband in what are essentially brownfield buildings served by Telstra copper,” the Department wrote. “As such, they do not, as a matter of course, have [infrastructure provider of last resort] obligations to service all customers and some customers may remain on the Telstra ADSL network, meaning they wouldn’t necessarily have access to superfast broadband connections. In these instances, there is a need for NBN Co to have a presence in those buildings to ensure superfast services are available for everyone who needs them.”
“While the Government wants to foster private sector investment and competition and avoid unnecessary expenditure, it also needs to ensure that all people have access to better broadband and NBN Co, as a commercial entity, also need to invest where it makes sense.”
opinion/analysis
I am planning a detailed comment piece on this topic for tomorrow (Thursday). However, suffice it to say that I consider it a little extraordinary that a Coalition Government would firstly, encourage a Government Business Enterprise to compete in any way with private sector corporations, and secondly, that it would describe such an outcome as “fair” in any way.
Image credit: Parliamentary Broadcasting
It’s simple.
They’re building Telstra Mark II, which they intend to sell off for $billions at the earliest opportunity to fund their pork-barrelling warchest.
Nothing to do with what’s best for the nation, or indeed other comms providers, just maximising value for the Coalition and their favoured sponsors, who are likely to buy the new monopolistic behemoth so they can screw a few hundred billion more $$ out of the national economy.
Nearly everything the Coalition does makes perfect sense when viewed in that light. :-(
>Nearly everything the Coalition does makes perfect sense when viewed in that light. :-(
Indeed :+(
So why overbuild rather than acquire?
I think there is a lot we don’t know about the existing infrastructure. It would be a mistake to assume that its suitable and meets NBN design rules.
yep, “fairer competition” I’ll agree with Turnbull, it is fair, OPENetworks wants to cherry pick easy areas and roll out FttB for the $$$ and GimpCo wants those same sites so Turnbull can say “See, look how many we have connected with FttN, FttP under Labor was too slow”.
Isn’t cheery picking how free markets work, as per Liberal doctrine? Or does the Coalition government mean “the other type of free markets”?
The whole basis of the original NBN was because “free Markets – Telstra Style (TM)” wasn’t working in supplying new tech and higher speeds.
Yet the Coalition is against a free-market ETS – they’re truly inconsistent.
Of course it is. So is there a market for infrastructure? Like where is the competing dirt road along side the asphalt road in front of my house? I’ve said for the longest time that infrastructure competition is utterly ridiculous, Turnbull and his apologists disagree with me and would say ‘we need competition to drive prices down etc’ just as they were before the election, so here it is, you wanted it you got it. I don’t necessarily endorse overbuilding FttB with FttB (if that is whats happening) but it is competition just like they wanted…
Wherever a network provides NBN-comparable services – including wholesale-only operation, open access, and fulfilment of the IPOLR role – there is no policy basis and little commercial reason for NBN Co to overbuild. This describes networks such as those operated by OptiComm or Pivit that currently have ‘adequately served’ status, and they will continue to be described as such provided the networks are upgraded over time and continue to meet the conditions under which that status was granted. It also describes prospective networks that meet specified standards – and this will be underpinned by the carrier licence conditions to be put in place to safeguard minimum performance.
Under the new policy, NBN Co must advise Shareholder Ministers in advance of construction if it considers there is a commercial case to materially overbuild an existing network providing NBN-comparable outcomes. This will be reflected in the next Statement of Expectations. Shareholder Ministers will carefully scrutinise any such case, given the cost inherent in undertaking capital expenditure in areas that already have high speed broadband. Such a commercial case will need to be approved by Shareholder Ministers (or be shown to adhere to a set of strictly defined conditions that Shareholder Ministers determine should be used to judge such requests) before NBN Co can proceed.
https://www.communications.gov.au/file/3661/download?token=fyJOYLr2
They are doing the same thing in buildings TPG has already enabled with FTTB… e.g. 70 Mary Street in Brisbane is just one example where TPG already have their gear in and NBN are going to overbuild them
I live in Conder in the far south of Canberra, am not even on the forecast list yet for Turnbull’s craptastic FTTN and will probably be among the last to be connected assuming they don’t run out of money first. I currently get a lowly 7.5Mbps.
From my perpsective I have absolutely no opinion on overbuilding apart from the obvious waste of taxpayer dollars. What does really concern me is why NBN is giving these areas priority over those that really need it sooner, cheaper and faster (sic). The original concept was supposed to be outside in, ie the outer suburbs and country areas first. The current trend seems to be doing overbuilding and blue ribbon areas first. Here in Canberra they are concentrating on the north side and city areas leaving the south with nothing. At this point I would even be happy with craptastic FTTN just to get something faster.
the bit about making commercial sense is baffling to me.
basically, by getting NBN involved in this area the best possible outcome with 2 providers is 50-50 of the market. much more likely is that one provider is going to get 60-70-80% and leave the remainder for the other; usually it is the first mover – OPENnetworks in this case?
i dont see how it can make ‘commercial sense’ for the money spent. i dont even see how it can fit the “invest where it makes sense” statement either …. certainly when it comes to the (alleged) mandate to cover underserved areas first. i would think in an underserved area you are more likely to take a significant portion of customers and make more revenue; as opposed to an area with a competitor you will have to fight for market share with.
to me it smacks of another way of ‘designing’ the network to fail after which point one can throw the hands up and say “see we tried, its not going to work, lets firesale it to private entities and wash our hands of it”. after the ideological ‘lets use FTTN cos its ‘not labor’ policy’ after the last election, it now very much looks like trying to set up a self fulfilling prophecy to wreck things in the event the governing party changes hands again next election. im sick of the wrecker mentality, basically, and its depressing to see how badly the LNP have lost the plot.
“Well, I never heard it before, but it sounds uncommon nonsense.”
Just another day at the Coalitions NBN Mad Hatters Party.
Is it possible that the buy price was higher than the build cost? I cannot imagine negotiations to purchase their deployment would not have considered technology differences, and the cost of re-capitalizing their investment to make it fully compliant with NBN spec would have increased the buyout cost significantly.
If (and its reasonable to assume they wanted to) the OPENnetworks wanted not just the NPV but some future profit, then the cost to build over may well have been SIGNIFICANTLY less than the buy out cost.
Hi George
I thought you and the readers should consider that the build cost published by NBN Co Limited in its half yearly Report as at 31 December 2014 stated that the cost per premises for:
– FTTP in Brownfields was $4,316
– FTTP in Greenfields was $2,780
– Fixed Wireless was $3,637
The VDSL2 price is still in a trial phase and the price not published.
Nobody from NBN Co Limited has ever approached OPENetworks about what our costs or sale price would be in any development or for any network or otherwise.
Deployment of VDSL 2 networks in Brownfields by OPENetworks started when NBN Co gave network deployments to developers for no charge, so that Developers made a windfall and NBN Co Limited could claim the greenfield connections when the negotiations with Telstra stalled the Brownfield rollout. OPENetworks deployed VDSL2 networks long before NBN Co decided to do so with its MTM strategy.
There should be law against any party selling our assets
Unless approved by referendum
+1000
I’m sick of parties flogging of our assets so their mates in big biz can gouge us via their shiny new monopolies which cost them nothing to build and which they usually run into the ground to maximise profits!
As Managing Director of OPENetworks I am keen to respond and, if possible, debate these issues with the Minister for Communications. The new policy as it is now unfolding suffers from a serious weakness that the wholsale fibre operators flagged with the Minister when we first saw it as a draft, 8 months ago.
I agree with responses by the community in the Whirlpool Forum that this policy of overbuilding seems a complete waste of public moneys unless the intent is to force out of the market all of the alternative smaller commercial operators that NBN Co does not want to buy (like it did Telstra, Optus and the FTTP part of IINet/TransACT).
The Minister has now replied to our complaints. He reiterated the policy that says that the previous process and protections for the non NBN Co operators to apply for determinations that areas or buildings are “adequately served” is unnecessary and no longer available, because NBN Co will follow commercial sense and not overbuild unless it makes commercial sense to do so. The first problem with that is that it might make commercial sense to the Management of NBN Co to spend many milllions to overbuild a small competitor because it is still cheaper and quicker to force them to liquidate than to negotiate a fair sale price as they did with Telstra, Optus and IINet/TransACT.
The second problem with the Minister’s hand off the wheel approach is that it allows what we now know is the inadequate (but huge amount) of public funds to be spent overbuilding places that probably get broadband up to 100Mbps X 40Mbps, whilst most places in Australia still have inadequate or expensive broadband, to say nothing about those in the “lucky country” without broadband.
The third justification that the Minister put forward was a real beaut. He argues that many of the places that NBN Co are overbuilding or might overbuild competing netwokrs are in “Brownfields” and it is fair to do so, but that this would not be permitted in Greenfields without his consent. He then claims that his consent would be limited to clear cases where it is fair and reasonable to consent. This is not a riddle, but when does a Greenfield become a Brownfield? When is a Brownfield building or area really a Greenfield?
For the Minister to avoid having to answer NBN Co asking for consent to overbuild existing superfast broadband networks, even if operated on a wholesale only open access basis, the answer is … whenever NBN Co likes. You see, Brownfields start life as Greenfields. So if NBN Co thinks it is a Brownfield then they simply never have to ask the Minister to consent to their overbuilding a competitor network. That sure cuts down on the red tape for NBN Co and the Minister. Pity it is expensive but who cares!!
To put it another way, land or buildings may be developed within an area where there will be other new developments being undertaken over many years and a network footprint of an NBN Co competitor might encompasses all of those lands, with new and existing buildings or otherwise vacant sites. An owner or developer may have chosen or, in future, choose not to deploy fibre or has deployed other access media or has no telecommunications network and relies on being “fibre ready”, so that any NBN Co or its competitors might deploy VDSL in the basements or to the nodes or Active Ethernet to the riser or floor of a building, instead of FTTP or FTTP where they think it is appropraite. When deployed, that network is probably still a superfast broadband network operated by appropraite operators (such as OPENetworks that is wholesale only Open Access carrier) who provides lots of choice for End Users in that any RSP can access those networks on non discriminatory terms and prices.
So … is the Minister leveling the playing field by heavilly subsidizing NBN Co and removing the only means for network operators to protect their investments, by seeking determinations that they are “adequately served”? Is he “fair” when he really never has to consider an applicaiton to overbuild competitor networks? Equally importantly, is it “commercially sensible” for NBN Co overbuild any competitor networks before it has finished the national broadband rollout to every other Aussie who thought the LNP was going to provide it quicker and cheaper than Labor? With two years down and only one year to go before the next election, when is the Minister going to actually direct NBN Co to act commercially, fairly and sensibly by issuing the long awaited Final Statement of Expectations. This is the only way government can effectively direct NBN Co to act fairly, commercially and sensibly, without overbuilding existing superfast broadband networks. That is the only way NBN Co will find a way to make a profit that could potentially attract capital needed two plug the multi-billion dollar gap in the NBN funding required in 2017, when the existing funds will probably run out.
Michael Sparksman
Managing Director
OPENetworks
Hi Michael, thanks for providing your POV – are you able to shed light on what your FTTN network is being overbuilt with? Is it FTTP or is NBN Co duplicating your FTTN build?
In Sydney Park Village and several sites in Sydney and at the Gold Coast, where the premises are multi dwelling units, the overbuilding by NBN Co Limited is with VDSL2 technology. In most of the sites where OPENetworks’ local network is being overbuilt by NBN Co Limited, we have also deployed VDSL2 technology, but in some buildings we have deployed active Ethernet switches in the riser of the building.
In Sydney Park Village at Erskineville, OPENetworks installed VDSL2 DLSAMs in 2 locations on the site comprising 17 residential medium density buildings. Those locations are joined by a fibre back backbone cable and connect to an optical fibre backhaul service to ensure that end users can get 100/40 Mbps services from RSPs connected to our networks. This was the site at which Malcolm Turnbull MP launched his MTM proposal and underpinned their FTTN strategy as being commercially sensible and achievable.
So I would generally say that the NBN Co Limited overbuild is with a like for like network that is also operated on the same basis, namely wholesale only open access and our wholesale pricing is regulated by the ACCC having regard to the NBN Co Limited prices. However, all of OPENetworks’ wholesale access charges are less than the NBN Co Limited charges for comparable services.
The sensible among us never thought the LNP was going to provide it quicker and cheaper than Labor. Before the election Turnbull told us that NBNco should be rolling out FttB to MDUs (I agree with this) because it would be quicker etc so is it any surprise that they now rolling out FttB to MDUs? It might not be “commercially sensible” but it is “politically sensible”.
Two years ago Turnbull said wholesale providers would still be able to compete with the NBN:
Apparently that is true, but back then you were too busy spruiking your solution and making sure everyone knew that “FttN” was the way to go and that FttP (as NBNco was providing) would be too expensive. GimpCo is now following your smart example. You should be happy.
“Is he “fair” when he really never has to consider an applicaiton to overbuild competitor networks?”
Since when has NBNco, or the minister, been “fair”? They aren’t and have not since the switch to mixed-technology (or even prior, to actually be fair).
Seeking logic from a Minister — who has taken an illogical approach to spend a considerable amount of money ensuring someone else (other than the government) profits from both the build now and pay later to build again model — is probably a bit late.
The juggernaut will continue. Market contraction of suppliers and retailers will continue. The writing was on the wall as soon as it became apparent that, no offence, both federal governments had to step in to resolve the rather tired state of internet access in Australia.
Could be argued that regulations failed. Or that Telstra had a bit more clout than it should. Or that the market should have damn well sorted this out years ago. Bit late now. Horse has bolted.
We’ve had a lot of time to get it right; instead we (community and market alike) effectively forced successive governments to try and do something neither are good at. The current Opposition seems equally hell bent on screwing with the deployment model.
That the ACCC seem to have no issue with the retail market effectively collapsing into digital oligarchies, IMHO, is probably more concerning than what the Minister hasn’t decided to do properly. Because what happens there is equally plausible on the other end of the delivery model.
Turnbull is clearly a fan of Thatcher – “..not for turning”.
I think this is as much proof as you will get of what this right-wing (not derogatory, just accurate) government would *really* like to see: competition in physical infrastructure. The Coalition still clings to the hope that it can be achieved, in spite of the Howard government’s full sale of Telstra, which ruined any chance of it. Thanks to the full privatisation of the 800-pound gorilla in Australian telecommunications, no other company has been game to take on Telstra in the physical marketplace, except around the edges with MDU loopholes here and DSLAMs there.
I thought it was explicitly a part of Malcolms plan to build the NBN “Faster, better, cheaper” that this kind of thing was ruled out. I guess that’s why they are falling so far behind now…
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